State of the Market: a Look atSurplus Lines Pricing Trends

By Bonnie Cavanaugh

The excess & surplus insurance market is beginning to show the tiniest bit of firming,
according to industry observers.
“A lot of carriers are beginning to
report a positive rate trend,” says
Stuart Farber, founder, chairman
and CEO of Preferred Concepts
in New York. But the increase is
skimpy, at 1 percent to 1. 5 percent.

Also on the positive front:
Farber adds that he is seeing an
overall return to underwriting
discipline and the pursuit of more
profitability.

For example, some of the stan-dard carriers that have ventured intothe E&S space are taking a freshlook at the business they’re writ-ing—and are pushing more restric-tive terms or not offering renewals,Farber says. Habitational insurance,for one, “has become more andmore difficult for carriers towrite,” he says. “Certain carriersare pushing rate on that class.”Upcoming reinsur-ance renewals in January arerumored to be asking a 5-per-cent to 10-percent rate increas-es, Farber says. But whetherinsurance companies willabsorb it or pass it on to clientsremains unknown at this point.

Rates starting to firm, at least (very) slightly

“it’s not a market [shift] being driven by
one cataclysmic
event.” rather,
it’s many smaller
things “nibbling
around the edge
of the cookie.”

Stuart Farber, founder,
chairman and CEO of Preferred Concepts

Ken Rudert, executive director of the Pennsylvania Surplus
Lines Association, says his state’s
E&S premium totals for the first six
months of 2011 are up 0.5 percent,
while the number of transactions
in the same time period rose 3. 7
percent.

“The only thing I can say with
some certainty is that we are holding our own here in Pennsylvania,”
Rudert says. “Reports I get from
the field—brokers, board members,
people like that—most seem to take
the position that they haven’t seen
any meaningful change.” J

of some new players—XL, for
example, opened up a new E&S
group within the last few months,
says Al Tobin, Aon Risk Solutions

“when you see people coming into the
business, you’ve
got to look at it
as that the carriers are optimistic
about rates.”

One factor exerting some
pressure on rates is a number of smaller disasters
whose aggregate impact
may be pushing prices.

“It’s not a market [shift] being driven by one cataclysmic event,” says Stuart
Farber, founder, chairman and
CEO of Preferred Concepts.
Rather, it’s many smaller things
“nibbling around the edge of
the cookie.”

managing principal for the NationalProperty Practice in New York.“When you see people coming intothe business, you’ve got to look atit as that the carriers are optimisticabout rates,” he says.